Addressing the On-Chain Liquidity Challenge

Author: Ash

Translation: Deep Tide TechFlow

The founder of @CurveFinance @newmichwill is launching @yieldbasis,

a Bitcoin AMM liquidity platform without impermanent loss (Note: IL, impermanent loss, refers to the potential loss a liquidity provider may suffer when providing funds to an AMM compared to simply holding those tokens);

At the same time, the founder of @yearnfi, DeFi god @AndreCronjeTech, is building @flyingtulip_, a unified AMM+CLOB (Note: Automated Market Maker + Central Limit Order Book, where AMM provides continuous liquidity and automatic pricing, while CLOB offers more precise price discovery and order execution) exchange.

Two different attempts to solve the same problem—how to make on-chain liquidity truly effective:

• Yield Basis ($YB): A Curve-native AMM that eliminates impermanent loss for BTC liquidity providers by holding a constant 2x leveraged BTC-crvUSD liquidity pool (the value of LP remains 1:1 with BTC while earning trading fees). Users can mint ybBTC (yield-bearing BTC).

• Flying Tulip ($FT): An on-chain unified exchange (including spot, lending, perpetual contracts, options, and structured yields) based on a volatility-sensitive hybrid AMM+CLOB architecture, combined with a slippage-sensitive lending mechanism, and ftUSD as the core incentive (a delta-neutral USD equivalent).

Yield Basis

• Traditional AMMs force BTC liquidity providers to sell when prices rise or buy when prices fall (√p exposure, Note: market risk exposure measured in square root of price), leading to impermanent losses that often exceed the fees earned from providing liquidity.

• The specific mechanism of Yield Basis will be detailed later, but the core idea is: users deposit BTC into the platform, the protocol borrows an equivalent amount of crvUSD, forming a 50/50 BTC-crvUSD Curve liquidity pool, and operates with 2x compounded leverage.

• A re-leveraged AMM and virtual pool will maintain debt approximately equal to 50% of the liquidity pool's value; arbitrageurs profit by maintaining constant leverage.

• This allows the value of the liquidity pool to change linearly with BTC while earning trading fees.

• Liquidity providers hold ybBTC, a yield-bearing BTC receipt token that automatically compounds trading fees denominated in BTC.

• The platform also offers a governance token $YB, which can be locked as veYB for voting (e.g., to choose liquidity pool reward distribution).

• Yield Basis primarily targets BTC holders who wish to release productive BTC and earn fees in protocols that solve the impermanent loss problem.

Flying Tulip

• The user experience and risk settings of traditional decentralized exchanges (DEX) are often static. Flying Tulip aims to bring centralized exchange (CEX) level tools on-chain by adjusting the AMM curve based on volatility and the loan-to-value ratio (LTV) based on actual execution/slippage.

• Its AMM adjusts curvature based on measured volatility (EWMA)—flattening in low volatility conditions (approaching constant product) to compress slippage and impermanent loss; exhibiting more product characteristics in high volatility conditions to avoid liquidity depletion.

• ftUSD tokenized delta-neutral liquidity pool positions are generated and used for incentive mechanisms and liquidity programs.

• The platform token $FT may be used for revenue buybacks, incentives, and liquidity programs.

• Flying Tulip is a DeFi super application: an exchange that simultaneously supports spot, lending, perpetual contracts, and options.

• Execution quality relies on accurate volatility/impact signals and robust risk control under stress conditions.

Outlook for Both Projects

Yield Basis aims to become the platform for BTC liquidity, while Flying Tulip strives to be the platform for all on-chain native trading. In an era where decentralized perpetual exchanges (Perp DEX) are mainstream, the launch of Flying Tulip is timely. Frankly, if it can deliver optimal execution, Flying Tulip could even redirect future BTC traffic to funding pools similar to YB. If Yield Basis successfully implements its model, ybBTC could become the "stETH" of Bitcoin: BTC exposure + liquidity provider (LP) trading fees, with no impermanent loss. Flying Tulip has the potential to launch its integrated stack, providing users with CEX-level tools; attempting "one-stop trading covering all DeFi." While maintaining cautious optimism about both projects, it is important to note that these OG founders and top teams' projects have yet to be tested, and the founders must also balance the development of other protocols (such as Curve and Sonic).

The above image is compiled by Deep Tide TechFlow as follows:

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